California’s Campaign Watchdog Bans Political Donations with Bitcoin

The Fair Political Practices Commission, California’s campaign watchdog arm, has voted 3-1 to ban political donations with any cryptocurrency, including Bitcoin, because of transparency issues.

The vote follows similar decisions made by other states in the country such as South Carolina. Others, like Colorado and Montana, allow cryptocurrency donations with restrictions.

In May 2014, the Federal Elections Commission stated that political campaigns could accept a $100 contribution limit per person and per electoral cycle, but didn’t address larger bitcoin contributions.

California Ban on Bitcoin Donations Follows Example of South Carolina

The Fair Political Practices Commission in California made four different proposals before going to a vote, with the first one being the total prohibition of any contribution in cryptocurrency, the Associated Press reported.

The second option would allow cryptocurrency contributions as cash contributions, limited to contributions of less than $100 from any source, and requiring cryptocurrency. The Political Reform Act (“Act”) already prohibits persons from making, and committees from receiving, cash contributions of $100 or more.

The Option Three would permit digital currency contributions as in-kind contributions, but requiring a conversion to cash upon receipt and deposited into the campaign bank account. The fourth option intended to allow in-kind contributions in cryptocurrency without conversion to cash. Furthermore, committees making contributions would maintain a separate cryptocurrency account and make expenditures from the account.

In April 2018, the House Legislative Ethics Committee of South Carolina decided that the State’s law “does not include “virtual” or “digital currency” in its definition of contribution.” The watchdog thus recommended that only legislation could change the state’s campaign donation practices.

“The Committee determined that it is not permissible for candidates for and Members of the South Carolina House of Representatives to receive campaign contributions in the form of Bitcoin or other digital currency. The Committee notes that there are many issues that need to be resolved regarding the acceptance of Bitcoin as a contribution to a political campaign for House office.”

In early 2015, the state of Tennessee changed the definition of “contribution” to include “digital currency” in order to officially allow political donations with Bitcoin et al. In August 2018, Oregon adopted a rule permitting Bitcoin contributions. In Montana, Bitcoin is accepted for political donation purposes, but it must be valued and converted to U.S. dollars or used to purchase some service or product.

The Kansas Governmental Ethics Commission stated that “the digital currency known as Bitcoin is too secretive to be allowed as a form of campaign contributions in state and local elections.” Washington D.C. accepts cryptocurrency as an in-kind contribution to be reported as received at the date it is liquidated into U.S. dollars. Colorado formally accepts cryptocurrency as contribution since July 2018 “up to the acceptable limit for a cash or coin contribution [$100].”